Farm bill may affect milk prices, with a possible increase up to $8 a gallon

So the prospect of starting 2013 paying as much as $8 per gallon for milk would have far-reaching consequences for the Davis County family, which has 11 children at home.

"That's over $110 a week just on milk. I love my kids and they need to eat well, but if you have to choose between a gallon of milk and a nice dinner with meat for my family, I'm going to choose the nice dinner with meat," Happie Larson said.

The farm bill expired three months ago. Unless Congress passes legislation renewing federal support for agriculture programs, milk prices could spike to between $6 and $8 per gallon, according to some estimates.

Fifth-generation Weber County dairy farmer Ron Gibson is of two minds about the possibilities.

"It's really a double-edged sword. It would be nice to have $8 a gallon for milk. (Consumers) can't afford to do that long term," Gibson said. "The bigger concern we have is that it could kill demand for our product. How many people will quit buying milk and start buying something else?"

Milk is just part of the dairy market. If the price of milk goes up, so goes the price of cheese, ice cream, sour cream and other dairy products, he said.

The dairy industry has worked hard to partner with the food service industry to encourage restaurant chains to use more cheese on home-delivered pizza or sandwiches.

Higher prices could result in the various chains cutting back on their orders, which would further pinch dairy farmers who are already struggling with higher feed prices due to the drought, Gibson said.

Low-income families would be particularly hard hit by price hikes, said Gina Cornia, executive director of Utahns Against Hunger.

"If you're dependent on food stamps to buy your groceries, people are going to do without," Cornia said.

Milk is selling for about $2.50 a gallon in Salt Lake-area grocery stores, according to store ads. The price for organic milk is nearly $4.50 at some stores.

"It will also be interesting how it will impact (infant) formula prices, which are already horrendous," Cornia said.

Congress is at an impasse over how much to cut food stamps, how much the government should subsidize crops and debate over how dairy prices should be stabilized.

While Cornia's immediate concern over the possible price hikes is the impact to families already struggling to buy nutritious food, she said the debate raises serious questions about agriculture supports.

"Why do we subsidize dairy as we do? Without them, is this ($8 per gallon milk) the real cost of dairy? If so, that's a conversation we need to have," Cornia said.

Unless Congress resolves the stalemate over the farm bill by the end of the year, the federal government would have to follow a 1949 law that would require the U.S. Department of Agriculture to buy milk at roughly twice the current market price to maintain a stable market.

Agriculture Secretary Tom Vilsack has said the department is exploring several options, which include an extension of the 2008 farm bill or holding off on milk purchases until Congress passes a new farm bill.

Gibson said the farm bill has been primarily stalled over debate on how much to cut the food stamp program, which a record number of Americans have accessed during the economic downturn.

"I don't see Congress touching it. Everyone is scared to death to deal with that. Anymore, the farm bill budget has very little to do with agriculture," Gibson said.